23 THE NAFCU JOURNAL NOVEMBER–DECEMBER 2022 “ With the Bureau signaling a shift toward increased supervision of BNPL fintechs, credit unions can begin to feel that the BNPL market has more certainty and that they are no longer at a competitive disadvantage. ” JAMES AKIN, REGULATORY AFFAIRS COUNSEL, NAFCU Financial Protection Bureau (CFPB), said Akin. “The CFPB has three areas of concerns related to BNPL: ease of accumulating debt by acquiring installment loans from multiple sources at one time, regulatory arbitrage where BNPL providers may skirt consumer protection laws and data security issues related to data harvesting and protection of buyer’s information.” In mid-September, the CFPB released its report summarizing its findings from the inquiry into the BNPL market, “Buy Now, Pay Later: Market trends and consumer impacts.” Simultaneously, the CFPB announced that it would begin bringing BNPL fintechs in line with consumer financial protection laws and subjecting them to supervisory examinations. Troublingly, the CFPB found that some of these BNPL products appear to be intentionally designed to avoid application of certain federal and state laws. “With the Bureau signaling a shift toward increased supervision of BNPL fintechs, credit unions can begin to feel that the BNPL market has more certainty and that they are no longer at a competitive disadvantage,” said Akin. Tarik Camurdes, Buy Now Pay Later/ Installments executive at FIS, does not believe that credit unions will face compliance challenges because most already offer loans and have the compliance structure in place. “An additional benefit of offering the product through the credit union is that member’s ability to monitor and manage loans in one place through an online dashboard or mobile app,” he said. This may help to address the CFPB’s concern that consumers may unknowingly take on significant debt due to BNPL loans offered by multiple providers with no central application to monitor the loans. There are two types of BNPL products. One takes place at the point of sale online or in person, and the other occurs post-purchase. The point-of-sale product is targeted to merchants and is where fintechs have found success—setting up platforms and signing agreements with merchants to offer the installment plan. Based on fragmented payment systems infrastructure, it is hard for banks and credit unions to set up a point-of-sale product offering because it means establishing agreements directly with “ In the U.S., larger financial institutions are providing BNPL or installment services by offering to convert specific purchases made on a consumer’s credit card to an installment payment plan. This is the easiest way to offer the service because it is not a new product, the credit union can set eligibility requirements to minimize risk and it lives in your own environment so you maintain the member relationship. ” TARIK CAMURDES, BNPL/INSTALLMENTS EXECUTIVE, FIS
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